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Monthly Archives: October 2012

You probably haven’t been thinking much about Legionnaires disease recently, but if you own a business that has air-conditioning cooling towers, fountains, hot tubs or other sources of standing water you might take a few minutes to think about your liability for an environmental incident. Legionnaires has not made national headlines for some time, but if you live in an area were and outbreak has occurred you know it is still around. It made headlines in the Rochester New York area as recently as early October of this year when it was found in an apartment complex there. In June of this year, and outbreak in Edinburgh Scotland killed one person and sickened 30 more.

Why should you be concerned? Well, if your business environment has sources of standing water that may present a risk of contamination with Legionella or your business has other potential sources of environmental pollution, you may have a risk exposure that is not covered by your current liability policy. The first identified outbreak of Legionnaires disease was in 1976, but since then there have been various toxic mold scares in the late 1990s and early 2000’s. While these sorts of events move relatively quickly through the public mind, they have major consequences in business. A spate of claims for legionnaires or toxic mold causes losses that were not contemplated by underwriters when they wrote liability policies. Insurers responded to these events by carefully crafting policy language that excluded pollution and related environmental factors such as mold and bacteria.

Washington is among those states that allow insurers to include an “absolute pollution exclusion” provision in their policies; your Washington business insurance may not protect you from liability associated with toxic mold, Legionnaires Disease or other environmental hazards. This absolute pollution exclusion generally contains language stating that the policy does not apply to injury or damages resulting from “discharge, dispersal, release or escape” of various hazardous substances and this applies whether or not such release is sudden or accidental.

As usual, when one door closes another one opens. As the “absolute pollution exclusion” language has become prevalent, insurers have developed environmental policies that bridge the gap in coverage. Today, environmental policies that supplement your commercial general liability policy are readily available and at relatively low cost. If your business has a liability exposure for pollutants of any kind, including those of mold or bacteria, it pays to take a look at your coverage and make certain you have all the liability protection you need.

Within the past decade, it is easy to remember headlines about automakers complaining that the addition of a new technology or a new requirement would increase vehicle costs and affect sales. Today, it appears that advances in automotive technology are actually driving the market and automakers are competing to add technology features to their new autos.

Many of the new technologies being developed for automobiles are safety related, or at least their addition to automobiles has some impact on the safety of drivers, passengers or others. Bankrate.com recently listed eight new technologies being introduced that included:

Rear-mounted radar.

Night vision with pedestrian detection.

Automatic high-beam control.

Parental control.

GPS vehicle tracking.

Cameras.

Driver capability.

In-car Internet.

Many of these technologies could have serious implications for your Washington auto insurance plans. GPS tracking, for example, can be a major assistance in recovering stolen vehicles; in car radar and camera systems have accident avoidance implications. Driver capability technology is not widely available, but it does appear to be in the offing and if combined with, for example, breath testing technology could have very important safety consequences.

Some of these new technologies have been tested for their safety implications. In Europe, laboratories have tested the Volvo XC 60 in experimental conditions. Half the vehicles were equipped with an automatic emergency braking system Volvo calls City Safety and half were not. At the end of the study period, the car is equipped with the city safety system filed property damage liability coverage claims 27% less often than those cars not so equipped.

Nissan is planning a new camera based accident avoidance technology for incorporation in a range of its vehicles. In the past, accident avoidance technology has been available in high-end vehicles but as been too expensive to put into a broad range of models. Nissan engineers worked to develop a sophisticated image processing system that can now manage pedestrian detection, lane-departure warning, and blind-spot warning features with just two wide-angle cameras—one in front, one in back. This is significantly driven the cost of this technology down to a point where it can be included in a wider range of vehicles.

It is not clear whether these technological changes will result in lower auto insurance premiums. The problem is that while the technologies may result in fewer accidents, the components of the technology may be exposed and may well drive up the costs of repairs. For example, a rear facing camera may help to avoid backing into someone, but if someone does run into the rear facing camera it may cost quite a bit to put it back into circulation. It is likely that we can count on waiting a few years to get enough experience with some of these advanced technologies to determine their impact on claims costs and ultimately on insurance rates.

One thing does appear certain, in this age of the smart phone, the Internet and our rapidly developing electronic technologies we are going to see lots more innovation from the automobile companies with respect to the use of technology. So long as the automobile buyer is willing to purchase vehicles with these technologies included we can look for more interesting and often more incredible features.

As the Industrial
Revolution took hold during the 19th century, the world of work changed. There
were new jobs by the latter part of the 19th century in industries that did not
even exist at the beginning of the century. Manufacturing was becoming
mechanized; transportation was revolutionized by the railroads. There were no
particular standards in those early years for the health and safety of workers.
Two events, almost exactly a century apart illustrate how far we have come in
society in our concern for our workforce.

On October 14,
1913 one of the worst mining disasters in British history took place at the Sengenhydd coal mine near Cardiff in Wales. The mine had two shafts and about
1000 workers were in the mine at around 8 o’clock in the morning when a series
of explosions tore through one of the shafts. The initial explosion was
probably methane gas, and this explosion would have raised clouds of coal dust
which then ignited in a series of subsequent explosions and fires. Rescuers
worked for three weeks following the explosion, but by the time everything had
settled and rescuers had dug their way through to rescue all of survivors they
could find, 439 people had died.

The British
government had an inquiry of course and a number of faults were found with the
operation of the mine. The total fines levied for these faults was 24 pounds,
an amount equivalent to about US$3000 today or about seven dollars per death.

This disaster and
others like it led to changes in federal and state laws. In the United States,
the Bureau of Mines was established in 1910 to study mine safety and help put
it in practice. The railroads had seen the Safety Appliance Act passed in 1893
that mandated the use of safety equipment on trains. Even more important to
safety in these early years were changes in approaches to workers compensation.
Congress passed an employer’s liability law in 1908 that really changed how
much an injured worker could receive. New York State passed a law in 1910 that
made compensation more or less automatic and set it at a fixed rate. WashingtonState passed its first industrial insurance law in 1911. These laws focused the
attention of business on health and safety issues as a matter of cost control.
The National Safety Council was set up in 1913 by companies as a way to study
safety issues and share that information. With both governments and private
industry interested in reducing the costs associated with workplace injury and
fatalities, the rates for these industries steadily declined.

Although mining
has always been a dangerous occupation and there have been disasters even in
recent years, an event nearly a century after the Sengenhydd mine may
illustrate how far we have come in our safety practices and in the ability to
respond. October 13 marks the anniversary of the recovery of 33 miners trapped
underground in a gold mine in Chile. The miners been trapped since August 5,
2010 when a portion of the mine collapsed. Although they were nearly half a
mile underground, they had been able to make it to an emergency safety area in
the mine where they held out until an international team was able to bore a
small hole into the cavern where the men were trapped and keep them alive and
well until a rescue shaft could be completed. Unlike the mine disasters of an
earlier time, this one ended with handshakes all around and a trip to
Disneyland.

It might seem
strange to think about your house, car or boat like a disease – well maybe not
your boat – but the medical profession has spent a lot of time and effort
thinking about how to manage risk; they may have some very good insights into
managing yours. In Preventive Medicine,
physicians talk about primary, secondary and tertiary prevention and use these
concepts to frame how they look at disease. Primary prevention is stopping a
condition before it starts; vaccination is a form of primary prevention we can
all easily understand. Some writers have applied the model to disaster response.

It is less
obvious, but you can apply the same notion of primary prevention to your home
and the safety of your family. For example, living here on the Olympic
Peninsula your home may be subject to fire danger. Clearing a wide area around
your home of brush, tall grass and other combustible materials will help create
a barrier that a wildfire may not be able to cross. Roofing your home with fire
proof materials would be another measure aimed at primary prevention of fire.
In the automotive world you can look at activities like checking your tires for
wear or making certain that all of your driving and signal lights are working
as primary prevention steps.

Secondary
prevention in medicine involves early detection and early intervention –
ideally these are steps taken early in illness or condition to prevent it from
getting worse; antibiotics for treatment of strep throat would be a classic
example. The objective of secondary prevention is generally to minimize harm.
Perhaps the best example of secondary prevention in the household safety world
is smoke detection equipment. When the smoke detector goes off, the fire has
already started but early warning helps protect people from harm and gives the
earliest warning to the fire department. You might consider antilock brakes a
secondary prevention method in automobile accidents or an automobile alarm
system as a secondary prevention method for theft. Safety belts are a classic
example of secondary prevention in automobile accidents. The belt mechanism
itself detects the rapid slowing the automobile that signals a crash and keeps
the passenger safely strapped in place during the accident.

Tertiary prevention is the hardest concept to understand in medicine because it seems
like once you have the condition it is too late to talk about prevention. But
tertiary prevention is where we spend the most money in medical care; it is the
attempt to take something that has already occurred and prevent it from getting
worse. Many diseases that once were thought to inevitably lead to death or
disability are now treated to minimize harm to the person. Among these we can
count cancer, heart disease and stroke.

It may seem less
clear how this concept applies to the family home or car, but it does apply.
Take the example of a windstorm that blows a few shingles off a roof. The
damage may be slight and cost only a few dollars to repair; it may not even
meet the homeowners deductible. The failure to repair the roof is similar to a
failure to treat a cancer. Over time, the cancer may grow and spread; over time
a week and roof a leak eventually affecting the roof itself and even the
rafters. In fact, this sort of tertiary
prevention is exactly what your insurance is all about – addressing the problem
to restore functionality and prevent further deterioration.

So, if you apply
a medical model to managing risk for your home and family, there are three
questions you need to keep in mind:

What can I do to
prevent (anything) from happening in the first place?

How can I learn
about a problem quickly and take steps to prevent it getting worse?

Once something
has occurred, what steps do I need to take to set things as right as possible?

Your insurance
program should help you address questions two and three.

Consumers facing
a multibillion-dollar business may feel they are at a bit of a disadvantage,
but the insurance business is highly competitive and there are plenty of ways
for individual consumers to exercise some control over their costs. Most of the
strategies for keeping your costs down in either home insurance or auto
insurance are pretty much common sense but they do require that the insurance
purchaser pays attention.

Whether it is
your Washington home insurance or auto insurance, talking in detail to your
agent is a good idea. You need to ask about the discounts available to you and
the sorts of discounts the different carriers may offer. Seniors, for example,
may qualify for a discount on their auto insurance if they have taken a
defensive driving course; homeowners who have installed safety or security
devices may qualify for discounts. A conversation with your agent may help
identify things you had not thought of.

Shopping around
is good advice, but you may not want to take that advice too often. Many
insurers offer discounts for longevity – that is the longer you keep your
policy the lower the premium goes. On balance, you may want to shop once and
stay long if you have a policy and coverage that suits you.

Deductibles areanother important area to consider for controlling your insurance costs. Both
home insurance and auto insurance have deductibles that may affect your rates.
If you have a relatively high tolerance for risk, or sufficient cash reserves,
you can increase your deductible and expect to see your insurance premiums
decrease.

If you are in the
market for new car, consider your insurance needs while you’re making your purchase. You could find out that the hours you spent negotiating with the car
salesman to get a slightly reduced payment is eaten up by the higher cost of
insuring the vehicle. Some cars have notoriously higher insurance costs than
others either because of the risk of theft or because their driving
characteristics more frequently put them in the hands of risk takers. Right
now, some of the more are the Cadillac Escalade, the Subaru WR X and the
Hyundai Tiburon; the least expensive cars to insure include the Ford Taurus,
several cars in the Buick family and the Honda Odyssey. A quick call to your
agent while you are a car shopping can save you some money.

Bundling your insurance is another great way to save. Companies that offer both home
insurance and auto insurance often offer substantial discounts when you take
both together. Instead of asking your agent to quote on a single insurance
need, it can pay off big time to let them know all of your insurance needs. If
you have a lot of toys – a home, a car, a boat, a motorcycle and an RV – you
might be surprised at how much you can save if you place all of those under one
insurance roof.

Industrial
insurance in Washington state has just completed its centennial year and
Washington was the first state in the nation to put an industrial insurance
program in place. Although insurance itself has a history that some folks trace
back as far as the Hammurabi code, industrial insurance protecting workers has
a much shorter history. In this country, the Mine Safety Act in 1864 was the
leading edge of efforts to help workers who were injured in the line of duty.
Organized labor began asking for industrial insurance legislation in the late
1870’s and by 1902, the state of Maryland passed the first workers compensation
legislation.

According to the
Port Townsend Daily Leader, Washington became the first state to institute a
state operated program of industrial insurance, joining Norway as “the only
locality in the world which has in active operation straight-out state
insurance against the hazards of industrial insurance” (Port Townsend Daily Leader, March 20, 1912,page 3). The Leader reported that “claims began pouring
in” as soon as the program was operational. Rates for the insurance program
whereby assessment against company payrolls and ranged from one a half percent
for lower risk industries to a high of 10% for powder mills. While the expected
claims experience was very high – up to 9% of the covered work force, the new
program was expected to cover its costs and build some reserves. In fact, the
program proceeded so well in its first year of operation that the Washington
industrial insurance commission was described as “buoyant with satisfaction” at
its performance.

The Leader noted
with approval that the program capitalized a reserve to take care of unmatured
risk. They characterized that approach as “a most important detail that mutual
and other public insurance schemes are inclined to overlook or defer.”